Jefferies Cuts Price Target on Yum! Brands (YUM) Following China Spin-Off
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Jefferies maintained a Hold rating on Yum! Brands (NYSE: YUM), and cut the price target to $60.00 (from $85.00), following the company's split from China. The next potential catalyst for YUM will be around further re-franchising as it looks to get from ~93% to ~98% franchised by 2018 with net G&A savings of $300mm and at least $3.75 of EPS by 2019. To achieve its $3.75 EPS target for 2019, YUM will need to exit 2018 with at least ~$3.30 of EPS.
Analyst Andy Barish commented, "Updating our model and price target following the split from China. With the China spin-off now complete, the outlook for YUM will return to fundamentals and its 98% franchised target with $300mm net G&A savings and at least $3.75 of EPS by 2019. We are taking a conservative approach and not modeling any benefits from further re-franchising given the uncertainty around timing. Our PT goes to $60 from $85, based on 14x our '17 EBITDA est. We remain at Hold."
Shares of Yum! Brands closed at $62.36 yesterday.
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